Direct Democracy and Public Employees

38 Pages Posted: 30 May 2007

See all articles by John G. Matsusaka

John G. Matsusaka

University of Southern California - Marshall School of Business; USC Gould School of Law

Date Written: May 2007

Abstract

In the public sector, employment may be inefficiently high because of patronage, and wages may be inefficiently high because of the strength of public employee interest groups. This paper explores whether the initiative process, a direct democracy institution of growing importance, can control these political economy problems, as proponents and some research suggests. Based on a sample of 500+ cities in 2000, I find that when public employees are allowed to bargain collectively, driving up wages, the initiative appears to cut wages by about 5 percent but has no measurable effect on employment. When public employees are not allowed to bargain collectively and patronage is a problem, initiatives appear to cut employment but not wages.

Keywords: Direct democracy, public employees, initiatives, unions

JEL Classification: H7, J45, D7

Suggested Citation

Matsusaka, John G., Direct Democracy and Public Employees (May 2007). Available at SSRN: https://ssrn.com/abstract=989679 or http://dx.doi.org/10.2139/ssrn.989679

John G. Matsusaka (Contact Author)

University of Southern California - Marshall School of Business ( email )

Department of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6495 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-6495 (Phone)

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